Mattel 2014 Annual Report Download - page 24

If Mattel is not able to adequately protect its proprietary intellectual property and information, and
protect against third party claims that Mattel is infringing on their intellectual property rights, its results
of operations could be adversely affected.
The value of Mattel’s business depends on its ability to protect its intellectual property and information,
including its trademarks, trade names, copyrights, patents and trade secrets, in the US and around the world, as
well as its customer, employee, and consumer data. The steps Mattel has taken may not prevent unauthorized use
of its intellectual property, particularly in foreign countries where the laws may not protect its intellectual
property as fully as in the US. Mattel may need to resort to litigation to protect its intellectual property rights,
which could result in substantial costs and diversion of resources. If Mattel fails to protect its proprietary
intellectual property and information, including any successful challenge to Mattel’s ownership of its intellectual
property or material infringements of its intellectual property, this failure could have a significant adverse effect
on Mattel’s business, financial condition, and results of operations.
Mattel has acquired certain intellectual properties from third parties. Declines in the profitability of these
acquired brands may impact Mattel’s ability to recover the carrying value of the related assets and could result in
an impairment charge. Reduction in net earnings caused by impairment charges could harm Mattel’s financial
results.
Unfavorable resolution of or adverse developments in legal proceedings, other investigations, or regulatory
matters could have a significant adverse effect on Mattel’s financial condition.
Mattel periodically receives claims of infringement of intellectual property rights held by other parties.
Responding to any infringement claim, regardless of its validity, may be costly and time-consuming and may
divert management and key personnel from business operations. If Mattel, its distributors, its licensors or its
manufacturers are found to be infringing on the intellectual property rights of any third party, they may be
required to obtain a license to use those rights, which may not be obtainable on reasonable terms, if at all.
Mattel is, from time to time, involved in litigation or other disputes, investigations, and regulatory matters.
An unfavorable resolution of these matters could have a significant adverse effect on Mattel’s financial condition
and its operations. Regardless of their outcome, these matters may result in substantial costs and expenses,
significantly divert the attention of management, or interrupt Mattel’s normal business operations. There can be
no assurance that Mattel will be able to prevail in, or achieve a favorable settlement of, any of these matters.
Mattel is subject to various laws and government policies or regulations in numerous jurisdictions,
violation of which could subject it to sanctions. In addition, changes in such laws or policies or regulations
may lead to increased costs, changes in Mattel’s effective tax rate, or the interruption of normal business
operations that would negatively impact Mattel’s financial condition and results of operations.
Mattel operates in a highly regulated environment in the US and international markets. US federal, state,
and local governmental entities, and foreign governments regulate many aspects of Mattel’s business, including
its products and the importation and exportation of its products. These policies or regulations may include
accounting standards, taxation requirements (including changes in applicable income tax rates, new tax laws and
revised tax law interpretations), product safety and other safety standards, trade restrictions, duties and tariffs,
and regulations regarding currency and financial matters, anticorruption standards (such as the US Foreign
Corrupt Practices Act), environmental matters, advertising directed toward children, product content, and privacy
and data protection, as well as other administrative and regulatory restrictions. While Mattel takes all the steps it
believes are necessary to comply with these laws and policies or regulations, there can be no assurance that
Mattel will be in compliance in the future. Compliance with these various laws, regulations and policies imposes
significant costs on Mattel’s business, and failure to comply could result in monetary liabilities and other
penalties, and could lead to significant negative media attention and consumer dissatisfaction, which could have
a significant adverse effect on Mattel’s business, financial condition and results of operations.
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